It’s back to the drawing board for members of the Leesburg Town Council, who are set to debate new rates for its water and sewer users.
The process kicked off Monday night at the council’s work session, when Public Resources Management Group—the Florida-based company hired again to complete the town’s rate study— presented its initial findings. Tuesday night, the council was expected to initiate changes to the Town Code pertaining to its water and sewer rates. But a final decision on new rates is still a long way away. A public hearing will be scheduled later this year, Town Manager Kaj Dentler said, in a process that is expected to last several months.
For the most of the current council, this will be the first time considering rate changes. Only Mayor Kelly Burk and council members Marty Martinez and Tom Dunn were around for the last rate debate when the council set rates for 2014 through June 30, 2019. This year, the council will be looking at a new five-year rate schedule that will take the town through 2024.
Robert Ori, president of PRMG, said the goal for the new rate study is similar to 2014—to develop a sustainable forecast and cost recovery plan. In 2014, PRMG discovered that the town’s water and sewer system was operating at a one-time debt service coverage ratio, meaning that if revenues without availability fees were taken into account, and after operating expenses were paid, Leesburg was only able to cover its debt service payments.
“What that really states is after you paid your debt, there were no dollars available for capital reinvestments,” Ori said.
Taking into account inflation, the water and sewer system’s gross depreciable assets—equipment considered a business expense over the lifetime of the asset, like vehicles and machinery—are valued around $420 million. In the past five years, Ori said, the town has pegged about $3 million for capital expenses but should be spending closer to $10 million. The initial plan proposed by the consultant calls for $102.5 million of capital spending over 10 years and assumes $40 million in new debt financing. Ori said that should minimize rate increases. In addition to a five-year rate plan, the consulting group has also developed a 10-year forecast to prepare for the next rate study.
As the town continues to grow, so do its expenses when it comes to its water and sewer system. About 6.2 percent a year in growth, or a $1.4 million increase annually, is needed to accommodate that growth and maintain operations, Ori said. And keeping up with that growth will require something the council has been loathe to do in recent years—hire more town staff. Ori said the proposed plan assumes an additional 18 new full-time staff members for the water and sewer system over fiscal years 2020 to 2024.
Ori said with Leesburg becoming a mature system, growth will eventually start to slow and so should the town’s reliance on revenue from developer’s availability fees. Looking into the outer years of the forecast, availability fees are expected to go back into the $500,000 annual range by 2028. In the past couple of years, by comparison, that number has averaged almost $2 million annually.
Initially, the consultant is proposing a rate increase that will mean an additional $5/month for its water and sewer users each year of the forecast period, based on an average 5,000 gallons of use. These rates would be comparable to neighboring jurisdictions, and Leesburg’s current average quarterly bill of $233.02 places it within the region’s average of $233.50, Ori said. Any proposed increases would take effect in July 2019.
At the conclusion of the presentation, Burk suggested that the town staff and PRMG hold open houses, akin to the ones done for transportation projects, to give the public as much insight into the proposed rates as possible.